Competition Law as Fairness

The upcoming issue of the Journal of European Competition Law and Practice (JECLAP) features an editorial I have written on the use of the term “fairness” in competition law these days. I was particularly happy to contribute to this journal, which and which also boasts the nicest team of editors possible (well, and Gianni too).

The term “fairness” seems to have made inroads into public portrayals of competition law (most prominently in salient speeches by Commissioner Vestager and AAG Renata Hesse). Some have reacted strongly into the use of this notion, seemingly due to fear that it may contaminate a realm of the law with even more subjectivity. Whereas I do share the sentiment that references to “fairness” cannot expand the reach of the competition rules, I also believe that a more fair society is a consequence of the right application of the competition rules and there is no reason to shy off from saying it explicitly. Competition law should not -and does not need to- be diverted to pursue fairness because it is already about fairness.Cast in this light references to fairness are not a way to divorce the discipline from economics, but to reconcile it with the public.

The editorial also contains, somehow in passing, the idea that efficiency is more useful as a guiding benchmark than as the ultimate goal of competition law. This idea is relatively common among progressive economists like Amartya Sen (my personal favorite) or Stiglitz, but it is relatively uncommon to hear it from experts in competition law due, I suppose, to the fear of being misinterpreted (which is what I try to avoid with the 8th paragraph of my editorial). Admittedly, general economists tend to see competition law as one more economic policy tool, perhaps failing to entirely realize that competition law may also lead to the imposition of “cuasi-criminal” fines and that one cannot severely punish a firm simply because it is more efficient than rivals (much less for doing things better, which may or may not coincide with being more efficient).

That is why, as I explain in the piece, short term efficiency considerations have a valid and important role to play in our field. But at the same time having efficiency as a sole beacon may chart an unduly narrow path. There are other values, like freedom to compete, choice or equality of opportunity, that may be equally worthy. The challenge in this regard is how to turn these into an operational framework capable of providing the necessary legal certainty.

In this regard I am happy to be in the company of now Judge Paul Nihoul, also General Editor of JECLAP (see here), of some of my favorite specialized economists (see here) and of whom is perhaps the greatest antitrust academic so far, Philip Areeda. In Areeda’s words (quoted from the 6th edition of his Antitrust Analysis textbook and which I did not have space to quote in the editorial):

– “The efficiency concept is at once powerful and weak: powerful because it is arguably the minimum necessary condition of any ideal economic system´s equilibrium, weak because it is not the only value considered important by our society”;

– “The economic model of competition also provides antitrust with a major value: efficiency. Other values impinge, however, to strengthen or retard the force of the unqualified competitive criteria. The task of antitrust, accordingly, is much more complex than simply moving the economy toward more nearly perfect competition”;

– “A free market may be seem as emphasizing competition as an aspect of human liberty. To favor competition for this reason relates to its assumed economic benefits but duffers because it emphasizes the social rather than economic merits of competition and is broader because it emphasizes opportunity and choice for producers and consumers even where fewer opportunities and choices might produce equally or more ‘efficient’ economic results”.

One Response

Fairness principles are often in tension: equity (distribution based on merit) , equal opportunity or income equality can not be sustained simultaneously.

procedural fairness may also conflict with distributive justice.

When fairness means something different to different people (the word fairness itself has no translation in many languages, like Spanish) can fairness really be a guiding principle for enforcement? Would it not create legal uncertainty?

Does the F in Frand mean more than simply not excessive?

Is it fair if an airline alliance results in lower cost for some passengers (say those travelling behind and beyond) at the expense of higher prices for passengers in the main (or trunk) route?

If a particular outcome is pareto optimal but winners cannot compensate losers via side payments? Is the outcome fair?